Domestic demand likely softened in 2023

MANILA, Philippines — The Philippines is expected to have experienced a softening in domestic demand toward the end of 2023 due to a decline in consumer confidence and savings, according to UK-based think tank Pantheon Macroeconomics.

In a report, Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco and senior Asia economist Moorthy Krshnan said domestic demand in the country likely ended on a bad note, based on a number of indicators.

“Domestic demand in the Philippines ended 2023 softly despite what appeared to be the start of a promising recovery in Q3 (third quarter),” Chanco and Krshnan said.

They cited the results of the Bangko Sentral ng Pilipinas’ (BSP) Consumer Expectations Survey (CES), which showed consumers becoming more hesitant to make big-ticket item purchases in the fourth quarter of last year.

The survey showed the confidence index for buying big-ticket items was at -71.3 percent in the fourth quarter from -62.7 percent in the third quarter.

“The bounce potential here in the short run looks limited in view of the sudden collapse in consumer confidence,” Chanco and Krshnan said.

In addition, the Pantheon economists said household incomes suffered a massive hit in the fourth quarter as savings dropped.

The BSP’s CES showed the share of households with savings declined to 29.1 percent in the fourth quarter of last year from 32.8 percent in the third quarter.

“The savings rebuild from the COVID hit made little-to-no headway in 2023, and this will continue to pose a huge headwind against consumption,” Chanco and Krshnan said.

Consumption is a key driver of growth for the Philippines.

Pantheon economists earlier said they expect Philippine economic growth to moderate to five percent in the fourth quarter.

The economy posted 5.9 percent growth in the third quarter, faster than the 4.3 percent in the second quarter.

For the first nine months of 2023, the economy grew by 5.5 percent.

The government set a six to seven percent growth goal for 2023.

The Philippine Statistics Authority will report on the country’s 2023 and fourth quarter economic performance on Jan.31.